QPX qpsx limited

ipernica receives us sar patent

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    To: ipernica investment community

    ASX Announcement

    8 January 2007

    ipernica receives US SAR patent

    ipernica ltd (ASX:IPR) is pleased to announce that the United States Patent and Trademark Office (?USPTO?) has issued ipernica with a significant US Patent covering its Segmentation and Reassembly (?SAR?) technology. The SAR technology incorporates intellectual property utilised in global telecommunications networks including metropolitan area networks and wide area networks. This US SAR patent adds to ipernica?s portfolio of SAR patents, which includes patents in Germany, Canada, Australia and the United Kingdom. The Company is now in a position to expand its wide area network SAR licensing program to include the United States.

    ?The US patent represents a major addition to our SAR patent portfolio, since the US is home to many world leaders in the manufacture and sale of wide area network products, such as ATM telecommunications equipment?, Graham Griffiths, ipernica?s managing director said.

    Impact on German SAR Litigation

    The other significant aspect of the grant of the US SAR patent is that it has occurred following detailed consideration by the USPTO of all prior art documents cited by Deutsche Telekom in the invalidity proceedings currently under appeal in relation to ipernica?s German SAR patent. The Company believes that the decision of the USPTO to issue the US patent over that prior art independently supports the Company?s confidence of success in the appeal of the German invalidity proceedings, and the successful conclusion of the related infringement action against Deutsche Telekom and Siemens.

    ?Securing this patent protection in the US for the SAR technology represents a significant Company milestone and concludes what has been an ongoing process of more than 10 years?, Mr Griffiths said, ?the rigorous process adopted by the USPTO gives us comfort that our SAR intellectual property rights are fully enforceable?.


    ipernica has previously been very successful in licensing its SAR technology for use in metropolitan area networks, a relatively small market as compared to the wide area network market. In the early 1990?s, the Company invested over $29 million in cell switch technology which paved the way for the adoption of its patented SAR technology in the International Telecommunications Standard (IEEE 802.6) ? a first for an Australian company. During the 1990?s, ipernica generated over A$100 million in license fees, including lucrative licenses with a number of major industry vendors such as Alcatel and Siemens, and direct sales. The Company continues to receive modest royalties for this field of use.

    In 2001, the SAR licensing program was expanded to include an additional field of use: wide area networks. The Company launched a European SAR licensing program, targeting negotiations with leading European manufacturers and users of ATM telecommunications equipment which the Company claimed incorporated the SAR technology. As part of this licensing program, in April, 2001, QPSX Europe GmbH, a wholly-owned subsidiary of ipernica, filed a DM125 million (A$115 million) writ against Siemens and Deutsche Telekom for infringement of the Company?s German patent covering the SAR technology. Note that the actual damages being sort are substantially higher than this initial writ value.

    The first major wide area network license granted by ipernica in relation to its SAR technology was concluded with Ericsson in 2003. Under the terms of the licence, Ericsson agreed to pay ipernica royalties based on its global sales of relevant ATM equipment, with royalty rates ranging between 3% and 5%. The Company is currently enforcing this licence agreement in proceedings in the Federal Court of Australia, which Ericsson is defending.

    ipernica expects to continue generating revenue from its SAR technology through commercially negotiated licence agreements and where necessary, through litigation against unauthorised users of the SAR technology. These claims for royalties are retrospective to the early 90?s and extend through to 2008, when the last of the SAR patents expire.

    Growth in Royalty Base

    The continued deployment of ATM technology, and hence the royalty base, can be demonstrated by the growth in Digital Subscriber Line (?DSL?) services (the dominant wide area network broadband technology), as well as Multi Service Switch (?MSS?) telecom infrastructure. Both DSL and MSS are examples of technologies that use the ATM protocol which ipernica claims incorporates its SAR technology.

    Leading US research group In-Stat, in a February 2006 report, forecast that by 2010 there will be over 400 million global broadband subscribers - double the current subscriber population. The rapid growth in worldwide broadband subscribers is being fuelled by the increasing availability of broadband services and the proliferation of new applications such as video and telephony services that rely on high-speed connections including ATM network infrastructure.

    In-Stat, in the same report, also found the following:

    * DSL remains the leading wide area network broadband access technology. On a worldwide basis, it currently accounts for 69% of all broadband subscribers.
    * Based on current worldwide broadband growth rates, 3.7 million new subscribers will sign up for broadband services each month this year. In the US, 670,000 new subscribers every month are projected to sign up for broadband service.
    * In late February 2006 the total number of worldwide broadband subscribers passed 200 million.

    In a February 2005 report on Multi Service Switches, In-Stat forecast global sales of US$18.3 billion between 2003 and 2009 (a compound annual growth rate of 6.2%), with 38% of these sales North American based. They ranked the top two MSS applications driving this growth as service provider ATM/FR networks (43%) and broadband aggregation (22%) to support the large and growing volume of DSL traffic.

    In terms of overall ATM communications infrastructure markets trends, in a March 2006 newsletter, CIBC World Markets noted the following:

    * 2.5G and 3G basestations are presently using ATM for backhaul; Internet Protocol (?IP?) is likely to replace ATM in this context in the future. ATM began to penetrate the basestation market when carriers began to deploy 2.5G infrastructure, and accelerated as data-heavy 3G systems were deployed.
    * ATM has replaced Frame Relay in most carrier switching networks, but is starting to be challenged by IP-based solutions.
    * ATM has been a natural fit for DSL backhaul technology including DSLAMs, as it is fast, scalable and able to handle both voice and data traffic sent over copper wire. The major DSLAM vendors are starting to use IP rather than ATM ? as with all technology shifts in carrier networks, this trend will take some time to play out.


    In light of continued industry utilisation of ATM telecommunication infrastructure, the granting of the US SAR patent is a significant and positive step forward for ipernica?s SAR wide area network licensing program.

    ?The continued deployment of ATM infrastructure globally, especially in growth areas such as wireless basestations, gives us confidence as to a substantial royalty base for our SAR licensing program ?, Graham Griffiths, ipernica?s managing director said.

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